B. Riley Financial(RILY) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - B. Riley Financial reported operating revenues of $194.5 million for Q3 2020, representing a year-over-year growth of almost 40% [5] - Operating adjusted EBITDA increased to $67.2 million, up more than 90% from $35.2 million in Q3 2019 [6] - Total revenues, including investment gains, rose 26% to $226.3 million, while total adjusted EBITDA grew 34% to $94.1 million [6][21] - Net income available to common shareholders was $47.3 million or $1.75 per diluted share, compared to $34.3 million or $1.21 per diluted share for the prior year [21] Business Line Data and Key Metrics Changes - The Capital Markets segment generated operating revenues of $115.1 million and segment operating income of $37.9 million, driven by increased fees in advisory services and the addition of the real estate business [22] - The Auction and Liquidation segment contributed revenues of $44.2 million and segment income of $12 million, with increased market activity in the U.S. and Europe [23] - The Valuation and Appraisal segment generated $9.7 million in revenue and $3 million in segment income, showing recovery from COVID-related slowdowns [24] - The Principal Investments segment, including United Online and magicJack, generated revenues of $21.6 million and segment income of $8.4 million [24] - The Brands segment contributed licensing revenue of $4 million and incurred segment income of $2.3 million [25] Market Data and Key Metrics Changes - The retail liquidation group experienced increased business activity, particularly in Europe, as retailers began to reopen [14][31] - The real estate group participated in 17 restructuring projects across approximately 1,600 locations, demonstrating strong engagement in various sectors [16][31] Company Strategy and Development Direction - The company is focused on delivering increased value to clients and partners across all business lines, aiming for long-term sustainable growth [20] - A strategic rebranding initiative was executed to consolidate legacy businesses under a unified B. Riley brand, enhancing service delivery [11] - The launch of B. Riley Venture Capital aims to invest in late-stage growth companies preparing to enter public markets [12] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about business recovery and growth drivers despite ongoing COVID-19 impacts [11] - The company plans to continue increasing its regular quarterly dividend, reflecting confidence in its business model and cash flow generation [8][10] - Management acknowledges the challenges posed by COVID but emphasizes the resilience and adaptability of the business model [5][11] Other Important Information - The company authorized $50 million in share repurchases to enhance shareholder returns [10] - B. Riley Financial had $169.7 million in unrestricted cash and cash equivalents as of September 30, 2020, with total cash and investments balance of $991.7 million [26] Q&A Session Summary Question: What types of opportunities does B. Riley see as most advantageous? - Management highlighted the challenge of harnessing diverse business areas and emphasized the potential for growth in principal investments and recurring revenue streams [39][41] Question: Is the normalized operating EBITDA around $250 million reasonable? - Management confirmed that the figure is accurate and expressed excitement about the upcoming Q4 report, which will not include the Barneys loss [46][47] Question: How does management view the company's valuation? - Management noted the difficulty in categorizing the company and emphasized the importance of cash generation and shareholder returns through dividends and buybacks [55][59] Question: Can you elaborate on the Venture Capital effort? - Management explained that the new venture capital initiative aims to leverage the company's public market experience to assist late-stage companies preparing for IPOs [65][66]